On September 17, 2014 the Food and Drug Administration (“FDA”) is holding a public hearing at the College Park Marriot Hotel and Conference Center, in Hyattsville, MD, to discuss the Agency’s implementation of the Generic Drug User Fee Amendments of 2012 (GDUFA) and its obligations under GDUFA as set forth in the GDUFA Commitment Letter accompanying the legislation. The central purpose of GDUFA is to help speed the delivery of safe and effective generic drugs to the public and to reduce costs to industry. GDUFA requires manufacturers to pay a user fee to supplement FDA’s costs of reviewing generic drug applications and inspecting facilities. Per the GDUFA Commitment Letter, the user fees enable the Agency to reduce a backlog of pending applications, cut the average time required to review generic drug applications for safety, and increase risk-based inspections.

At the public hearing, FDA will focus on two particular aspects of GDUFA: (1) soliciting public comment on the five draft guidance documents that FDA has issued to facilitate implementation of the law, and (2) recommending future policy priorities, including recommendations for additional guidance topics to facilitate GDUFA implementation (e.g., 180-day generic drug exclusivity, and potential first generics). The meeting will provide an opportunity for public input from all interested parties, including regulated industry, consumers, patients, caregivers, health care professionals, and patient groups, on future FDA policy priorities.

To register for the hearing or to make a request to make an oral presentation at the hearing, send an email to GenericDrugPolicy@fda.hhs.gov, by September 3, 2014, that includes the complete contact information for each attendee, including name, title, affiliation, address, email address and telephone number. FDA will accept electronic and written comments on this topic after the hearing until October 13, 2014. Electronic comments may be submitted at www.regulations.gov.

About the Authors: Jennifer Pike (Associate) and Vicki Morris (Law Clerk) are both members of the firm’s Life Sciences Health Industry Group and are based in our Washington, D.C. office.

Recent Congressional hearings have addressed the following health policy issues:

The House Energy and Commerce Committee has held hearings on Medicaid reform, implementation of the ACA, and reform of drug compounding regulations. An August 1 hearing entitled “PPACA Pulse Check” will feature testimony by CMS Administrator Marilyn Tavenner.

The Senate Finance Committee held two hearings on health information technology, along with a hearing on repealing the SGR.

Today, the Obama Administration released its proposed federal budget for fiscal year 2014. As widely reported, the budget incorporates an offer the President made to Congress in December 2012 to achieve nearly $1.8 trillion in additional deficit reduction over the next 10 years, including $401 billion in health savings (the Administration observes that this level of cuts would “provide more than enough deficit reduction to replace the damaging cuts required by the Joint Committee sequestration”).

Virtually all provider types – and drug manufacturers – would be impacted by the budget provisions, if adopted as proposed. The budget proposal is certainly subject to change during the legislative process, particularly as the House and Senate leadership pursue alternative budget frameworks, and indeed, gridlock could prevent significant action on entitlement reform this year. Nevertheless, the proposals bear careful monitoring because they could eventually be included in any long-elusive “grand bargain” to reform the Medicare program and reduce the federal debt.

Highlights of the Administration’s Medicare and Medicaid proposals include the following:

Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated severity conditions), saving about $2.5 billion over 10 years.

Equalize IRF and SNF payments for three conditions involving hips and knees, pulmonary conditions, as well as other conditions selected by the Secretary, saving $2.0 billion over 10 years.

Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2017, saving $2.2 billion over 10 years.

Implement bundled payments for post-acute care providers (LTCHs, IRFs, SNFs, and HHAs) beginning in 2018. Payments would be bundled for at least half of the total payments for post-acute care providers. Rates based on patient characteristics and other factors would be set to produce a permanent and total cumulative adjustment of -2.85% by 2020. Beneficiary coinsurance would equal levels under current law. This provision would save $8.2 billion over 10 years.

Align Medicare payments to rural providers with the cost of care, saving $2 billion over 10 years.

Reduce payment for physician-administered Medicare Part B drugs from 106% of average sales price to 103% of average sales price. Manufacturers would be required to provide a specified rebate in certain instances as determined by the Secretary “to preserve access to care.”

Provide Medicaid-level drug rebates for brand name and generic drugs provided to beneficiaries who receive Part D low-income subsidies, saving $123 billion over 10 years.

Close the Medicare Part D donut hole by 2015, rather than 2020, by increasing manufacturer discounts to from 50% to 75% beginning in plan year 2015.

Lower Medicaid drug costs by clarifying the definition of brand drugs, excluding authorized generic drugs from average manufacturer price calculations for determining manufacturer rebate obligations for brand drugs, making a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, and calculating Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.8 billion over 10 years.

Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments, saving approximately $7 billion over 10 years.

Improve program integrity for Medicaid drug coverage by directing states to track high prescribers and utilizers of Medicaid prescription drugs; requiring manufacturers to make full restitution to states for any covered drug improperly reported by the manufacturer on the Medicaid drug coverage list; allowing more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; requiring drugs to be electronically listed with the FDA to receive Medicaid coverage; and expanding penalties for reporting false information for the calculation of Medicaid rebates.

Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission to stop companies from entering into “pay for delay” agreements and modifying the length of exclusivity on brand name biologics.

Program Integrity/Efficiency Provisions

Provide $640 million in combined mandatory and discretionary program integrity funding to implement activities that reduce payment error rates, prevent fraud and abuse, target high-risk services and supplies, and enhance civil and criminal enforcement for Medicare, Medicaid, and CHIP.

Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records and permit exclusion of individuals affiliated with entities sanctioned for fraudulent or other prohibited actions from federal health care programs.

Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in additional health care settings.

Exclude radiation therapy, therapy services, and advanced imaging from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary.

Require prior authorization of advance imaging services.

Require prepayment review or prior authorization for power mobility devices.

Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.

Other Medicare Provisions

Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.

The FDA has announced the generic drug active pharmaceutical ingredient (API) and finished dosage form (FDF) facility user fee rates for fiscal year 2013. The API facility fee is owed by each person that owns a facility which produces, or which is pending review to produce, one or more APIs identified, or intended to be identified, in at least one generic drug submission that is pending or approved or in a Type II API master file referenced in such generic drug submission. The API facility fee for 2013 for domestic facilities is $26,458, while the API facility fee for foreign facilities is $41,458. The FDF facility fee is owed by each person that owns a facility which is identified or is intended to be identified, in at least one generic drug submission that is pending or approved, to produce one or more finished dosage forms of the human generic drug. The FDF facility fee for 2013 for domestic facilities is $175,389, and the FDF facility fee for foreign facilities is $190,389. Both API and FDF fees are due on March 4, 2013. FDA is authorized to collect these fees, among others, under the Generic Drug User Fee Amendments of 2012.

On October 25, 2012, the Food and Drug Administration (FDA) published in the Federal Register the fiscal year (FY) 2013 rates for certain filings under the Generic Drug User Fee Program. Specifically, the notice establishes the new annual rates for an abbreviated new drug application (ANDA) ($51,520), prior approval supplement ($25,760), and drug master file ($21,340). These fees are effective on October 1, 2012 and remain in effect through September 30, 2013. The fees for the ANDA and prior approval supplement are due by the applicant on the date of submission, or 30 days after the published notice (i.e. November 24, 2012), whichever is later. The drug master file (DMF) fee is owed by each person that owns a type II active pharmaceutical ingredient drug master file that is referenced, on or after the effective date in a generic drug submission by an initial letter of authorization. This one-time fee for each individual DMF is due no later than the date on which the first generic drug submission is submitted that references the associated DMF, or 30 days after the published notice (i.e. November 24, 2012), whichever is later.

Also on October 25, 2012, FDA published the 2013 rate for the backlog fee related to generic drug user fees. The backlog fee of $17,434 is effective on October 1, 2012. Each person that owns a pending ANDA on October 1, 2012 -- i.e., an ANDA submission that has not received tentative FDA prior approval to the effective date -- is subject to the backlog fee for each such application. The backlog fee is a means for FDA to generate enough resources to process its backlog of ANDAs. FDA currently has an approximate backup of over 2,800 ANDAs. The backlog fee is due no later than 30 days after the published notice (i.e. November 24, 2012).

President Obama has signed into law a temporary spending bill (H.J.Res. 117) to fund the government until March 27, 2013 in light of Congress’ failure to reach agreement on the regular appropriations bills before the start of the new fiscal year on October 1, 2012. In addition, on October 5, 2012, President Obama signed H.R. 6433, the FDA User Fee Corrections Act of 2012 (which allows the FDA to collect all generic drug user fees authorized by the recently-enacted FDA Safety and Innovation Act for FY 2013), and H.R. 4223, the Safe Doses Act (which seeks to combat theft of prescription drugs and other medical products). Our previous summaries of these bills are available here.

On September 21, 2012, the Senate joined the House in approving H.R. 6433, the FDA User Fee Corrections Act of 2012. The bill would allow the FDA to collect all generic drug user fees authorized by the recently-enacted FDA Safety and Innovation Act for FY 2013, rather than a reduced level of fees allowed under the short-term funding bill also cleared by Congress on September 21. H.R. 6433 is now awaiting the President’s signature.

On August 27, 2012, FDA issued draft guidance documents for industry entitled "Self-Identification of Generic Drug Facilities, Sites, and Organizations" and "Generic Drug User Fee Amendments of 2012: Questions and Answers." The Generic Drug User Fee Amendments of 2012 (GDUFA) requires that generic drug facilities, sites, and organizations around the world provide identification information annually to FDA. The GDUFA also is designed to speed the delivery of safe and effective generic drugs to the public and reduce costs to industry, and enable FDA to assess user fees to support enhancements to FDA’s generic drugs program. The first draft guidance document is intended to assist industry as it prepares to meet the law’s self identification requirement. It explains who is required to self-identify, what information must be requested, how the information should be submitted to FDA, and what the penalty is for failure to self-identify. The second guidance document answers common questions from the generic drug industry and other interested parties involved in the development and/or testing of generic drug products regarding the requirements and commitments of GDUFA. To be considered before FDA begins work on the final versions of these documents, comments should be submitted by October 26, 2012.

In a recent report, “Drug Pricing: Research on Savings from Generic Drug Use,” the GAO reviewed studies on savings associated with generic drug use in the U.S. In brief, the studies had mixed conclusions regarding the effect of using generics. While some studies point to substantial savings associated with substituting generic drugs for their brand-name counterparts, others raise questions about whether substituting generic drugs for brand-name drugs was medically appropriate and could lead to other health care costs, such as increased hospitalizations.

The House Energy and Commerce Health Subcommittee has announced a series of hearings on FDA user fees for prescription drugs, generic drugs, biosimilar drugs, and medical devices. The hearing schedule is as follows: a February 1, 2012 hearing will address reauthorization of the Prescription Drug User Fee Act; on February 7, a Subcommittee hearing will focus on the new Generic Drug User Fee proposal and Biosimilar User Fee proposal; and on February 15, the Subcommittee will hold a hearing on reauthorization of the Medical Device User Fee Act.

On December 19, 2011, the FDA is hosting a public meeting to discuss proposed recommendations for enactment of a Generic Drug User Fee Act (GDUFA), which would authorize FDA to collect fees and use them for the process for the review of human generic drug applications and associated Type II Active Pharmaceutical Ingredient Drug Master Files and for conducting associated inspections for fiscal years (FYs) 2013–2017. The FDA notes that new legislation would be required for FDA to establish and collect user fees under such a program. Registration for the meeting closes December 12; the meeting also will be webcast. The FDA also is accepting written is comments on the recommendations until January 6, 2012.

On September 19, 2011, President Obama presented his deficit reduction plan – including $320 billion in proposed federal health spending cuts – to the Joint Select Committee on Deficit Reduction, which was created by the Budget Control Act of 2011 to craft a legislative package to cut the federal deficit by at least $1.5 trillion. If legislation is not adopted to achieve deficit reduction targets by January 2012, $1.2 trillion in across-the-board spending cuts (sequestration) would be triggered, effective January 2013.

The health care industry has a significant stake in the outcome of the Joint Select Committee’s work, since Medicare spending in particular is expected to figure prominently in the Committee’s package. Under President Obama’s plan (which the Joint Select Committee is not obligated to follow), Medicare spending would be cut by about $248 billion over 10 years, with more than half of the savings coming from new Medicare drug rebates. Medicaid and other health funding also would be reduced by about $72 billion. If sequestration ultimately is triggered, on the other hand, Medicare provider payments also would be subject to reduction; but the Congressional Budget Office (CBO) recently estimated that the level of Medicare cuts under sequestration would be approximately $123 billion between 2013 and 2021.

This Alert provides an overview of the Budget Control Act, including the two possible mechanisms for lowering the federal deficit: (1) enactment of the Joint Select Committee’s proposal; and (2) sequestration. In addition, this Alert discusses recent developments, including President Obama’s deficit reduction plan, and provides a timeline for action under the Budget Control Act.

On July 21, 2011, the Senate Judiciary Committee approved S. 27, the Preserve Access to Affordable Generics Act, which would prohibit certain so-called “pay-for-delay” agreements in patent litigation settlements in which a brand-name pharmaceutical company compensates a generic pharmaceutical company for delays in generic entry. On July 28, 2011, the House Energy and Commerce Committee approved H.R. 2405, the Pandemic and All-Hazards Preparedness Reauthorization Act (which reauthorizes certain provisions of the Project Bioshield Act of 2004 and Pandemic and All-Hazards Preparedness Act of 2006); H.R. 1254, the Synthetic Drug Control Act (which would make illegal synthetic drugs that imitate the effect of drugs like marijuana, cocaine, and methamphetamines); and H.R. 1852, the Children's Hospital GME Support Reauthorization Act (which provides support to children’s hospitals for pediatric medical residency programs). On August 3, the Senate Health, Education, Labor and Pensions Committee Committee is scheduled to vote on S. 958, the Children's Hospital GME Support Reauthorization Act, and S.1094, the Combating Autism Reauthorization Act.

A number of Congressional panels have held hearings on health policy issues this month, and more are scheduled, including the following:

The House Energy and Commerce Committee has held hearings on: reauthorization of the Prescription Drug User Fee Act (PDUFA); the ACA’s Independent Payment Advisory Board (IPAB), which is charged with helping to contain Medicare costs; and legislation addressing children's hospital graduate medical education (GME) costs (H.R. 1852) and autism research (H.R. 2005). On July 20, the panel will hold a hearing on “FDA Medical Device Regulation: Impact on American Patients, Innovation and Jobs." On July 21, the Committee will hold a legislative hearing to review H.R. 1254, the Synthetic Drug Control Act, H.R. 2405, a bill to reauthorize certain provisions of the Public Health Services Act and the Federal Food, Drug, and Cosmetic Act relating to public health preparedness and countermeasure development; and draft legislation entitled the Enhancing Disease Coordination Activities Act.

The HHS Office of Inspector General (OIG) has issued a report entitled “Medicare Payments for Newly Available Generic Drugs.” The report notes that because of the timing of manufacturer reporting of quarterly average sales price (ASP) data to CMS and when those data are used to calculate payment amounts, there is a two-quarter lag between when sales occur and when Medicare payment amounts reflect those sales. This lag can have a significant impact when newly-available generic drugs enter the market, since their ASPs can be substantially lower than their brand counterparts but Medicare payment can remain at the higher brand level for two quarters or more. According to the OIG, Medicare could have saved an estimated $111 million if “payment amounts reflected actual sales prices during the initial generic availability of 16 drugs,” representing 25% of total expenditures for these drugs during the period. The OIG recommends that CMS: (1) work with Congress to require manufacturers of first generics to submit monthly ASP data during the period of initial generic availability, and (2) if effective in alleviating the financial impact of the two-quarter lag, consider requiring monthly ASP submissions for all Part B-covered drugs. CMS did not concur with the OIG, noting increased administrative burdens associated with monthly ASP reporting requirement and the potential that it actually would result in price increases.

FDA will hold a public meeting on September 17, 2010 to seek input on the development of a generic drug user fee program. Currently, FDA does not have the statutory authority to collect user fees for generic drugs. Specifically, FDA seeks comments on: (1) how the generic user fee program should differ from current user fee programs; (2) the structure of the generic user fee program; (3) performance goals for FDA; (4) whether all products should pay the same fee, or differ based on complexity of the application; (5) how to address applications currently pending review; and (6) support for post-marketing safety by generic user fees. Registration for the meeting closes September 9, 2010, but early registration is recommended. Written comments are being accepted until October 17, 2010.

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